We are in the midst of a worldwide epidemic of obesity, which is a major risk factor for type 2 diabetes and is closely linked to other components of metabolic syndrome, including insulin resistance, dyslipidemia, hypertension, fatty liver, and increased risk of cardiovascular disease. The development of obesity not only depends on the balance between food intake and energy utilization but also on the balance between white adipose tissue, which is the primary site of triglyceride storage, and brown adipose tissue, which is specialized for energy expenditure. Recently, compelling evidence reveals that brown fat is present and active in adult humans, and its presence and activity are inversely associated with adiposity and indexes of metabolic syndrome. Thus, inducing brown fat differentiation and function becomes a very attractive way to counteract obesity. Our long-term goal is to gain fundamental knowledge of the cellular lineage specification of brown fat and the inductive signals determining brown adipose formation, and to use this knowledge to develop potential therapeutic approaches to treat obesity. Recently, we and others have gained insight into the cellular origin of brown fat cells and the factors that underlie the divergent differentiation fates and functions of different adipose depots. Combining cellular, molecular and physiological approaches, we have discovered that the developmental signaling molecule bone morphogenetic protein (BMP) 7 specifically promotes brown adipocyte differentiation and function. In addition, we have identified and isolated a subpopulation of endogenous progenitors residing in murine brown fat, white fat, and skeletal muscle. The developmental fate of these progenitors is regulated by BMP7. Therefore, we hypothesize that BMP7 functions as an inductive signal providing instructive cues to progenitors to differentiate into brown fat lineage, thereby playing a significant role in whole body energy metabolism. In this grant, we propose to directly test this hypothesis by determining the interplay between tissue resident progenitors and niche factor BMP7 in determining brown fat cell fate using conditional knockout models and cell isolation approaches. At the molecular level, we will determine the role of microRNAs in mediating BMP7's brown adipogenic effect. Finally, we will delineate the physiological role of BMP7 signaling in the regulation of brown adipogenesis and whole body energy metabolism using murine models with specific impairments of BMP7 signaling in the niche cell, the progenitors, and the mature brown adipocytes and determine whether increasing the availability of BMP7 in proximity to adipose progenitors in vivo can lead to increased brown fat-mediated energy expenditure. Accomplishing the proposed studies will not only improve our current understanding of brown fat development and energy metabolism, but also suggest a novel pathway in the regulation of energy expenditure, and ultimately help to develop potential therapeutic approaches to treat obesity and its many related disorders.